Armed Polite Society
Main Forums => Politics => Topic started by: Ben on September 12, 2019, 09:25:05 AM
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Trump is demanding an interest rate of ZERO.
I have read a half dozen articles from various sources across the political spectrum to look for the "Trump gotchya", but there doesn't seem to be one. He is apparently serious. He is an idiot. I have (sometimes applauding, sometimes grudgingly) respected most of his fiscal policy up to this point, but this is insanity.
Zero interest rates means you pay the bank to store your money. It means retirees get screwed, and it means, at best, a short term gain for businesses at the cost of long term stagnation of the economy. Other countries have tried or are doing this. Much like communism, it never works. This is just stupid.
I'm hoping against hope that this is just another one of his tricks to rile certain people up, but all indications are that he's dead serious. Obviously he can't "make" the fed do this, but the fact that he thinks it's a good idea is just nuts. Obama was bad enough with the artificially depressed interest rates. Interest rates need to go slowly up, not down, and especially not to zero.
https://reason.com/2019/09/11/trump-demands-zero-interest-rates-from-boneheads-at-the-federal-reserve/
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He needs a strong economy (even just temporarily) to help his reelection campaign and he believes lower interest rates will keep the economy afloat. It's as simple as that.
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He needs a strong economy (even just temporarily) to help his reelection campaign and he believes lower interest rates will keep the economy afloat. It's as simple as that.
The economy is looking pretty good.
What ISN'T looking pretty good is the interest on the national debt...
While it may be the economy everyone is thinking about, that roughly $500BILLION in interest is a lot of money.
IF Trump would use zero interest to pay down the debt, that would be nice... but a pipe dream. It could, however, eliminate the deficit for a time.
(Note, I don't think it's a good idea, and I doubt it would achieve any of that, but I'm providing an alternative take on the reasoning. I'd much prefer we CUT SPENDING, but apparently that's like garlic to a vampire for politicians.)
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If a zero interest rate could lead to favorable refinancing or paydown of our national debt, I would be interested.
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If a zero interest rate could lead to favorable refinancing or paydown of our national debt, I would be interested.
It couldn't, though, could it? Treasury bonds are sold at a given rate for a given time. If you held a ten year treasury note at 2% or whatever, why would you let the government "refinance" to 0% (or less)?
Sure, maybe new bonds could be sold at 0% (or less), but that would make them harder to sell.
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If AOC was as rich as Trump, I might agree with the thread title. As for zero percent interest ..... [tinfoil] .... I think it's another Trump throw-away line.
I usually have zero percent interest in them. >:D
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If a zero interest rate could lead to favorable refinancing or paydown of our national debt, I would be interested.
But that's what other countries (e.g., Germany, Japan) are trying, with really no good results, even in the short term.
I agree Trump is probably looking at this short term, because it CAN make things look good - 2% home loans, 3% car loans even for people with low FICOs to get them all to throw money into the economy, etc (because why pay to keep money in the bank?). But it's unsustainable, and that's the problem. At some point interest rates have to go back up for stability, to a higher point than they are now. The last thing you want to do for the long term is decrease them more now.
I mean, how about if we actually stop increasing the national debt by cutting spending before we look at cutting it down?
Zero percent interest is really no different than the left's "here's some free stuff" policies. At some point, somebody has to pay for it.
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If a zero interest rate could lead to favorable refinancing or paydown of our national debt, I would be interested.
I hate to bring up math, but the way you paydown the debt is to reduce spending to less than you're taking in, not by fiddling with interest rates. That hasn't happened since Clinton was in office, and he quickly corrected that fluke.
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Artificially low interest rates prop up the stock market. Ben is right. A slow increase of interest rates on savings and money market ie safe investments should be happening and wouldn't adversely hurt stocks if done slowly. It was doing that and Trump has fouled that up.
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Good for cryptocurrency enthusiasts.
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Good for cryptocurrency enthusiasts.
Probably good for a lot of people. If I were 30 right now instead of 59, I might be shouting, "Go Trump! DOW 40,000! Yee-haw!"
At 35, riding out, "Oh crap! DOW now 20,000!" is doable if you're diversified. At 59, I'm trying to keep food on the table with just my retirement investments, and I don't have the time to ride out a 10 year recovery.
As Grampster said, a very slow interest rate increase to a reasonable rate would not affect the stock market much, and would do a lot for long term stability.
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Context, gentlemen. Context. If I'm reading the story correctly, Trump was speaking in terms of zero interest relative to the Federal Reserve Board. That's a entirely different critter than an economy-wide zero rate.
A zero rate from FRB lowers the cost of money to banks. That lowers consumer rates, encourages borrowing for capital expenditures, and generally reduces the cost of, well, everything and supports an active, healthy economy. The downside is that care must be taken lest the lower cost of money lead to unfettered borrowing and uncontrolled inflation.
Brad
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At 59, I'm trying to keep food on the table with just my retirement investments, and I don't have the time to ride out a 10 year recovery.
Being the same age as Ben, and probably only a couple of years from retirement, I share his keen interest on this. The 10 year recovery was a driving factor in me buying the SPIA earlier this year. If I were to file for SS at age 62, I will have a guaranteed income stream of $ 3K per month ($2K SS and $1K annuity). This will hopefully enable me to ride out the future stock market gyrations with the 401(k). My wife will have a similar but somewhat less guaranteed income stream from SS and her pension plus her 403(b).
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Probably good for a lot of people. If I were 30 right now instead of 59, I might be shouting, "Go Trump! DOW 40,000! Yee-haw!"
At 35, riding out, "Oh crap! DOW now 20,000!" is doable if you're diversified. At 59, I'm trying to keep food on the table with just my retirement investments, and I don't have the time to ride out a 10 year recovery.
I have a bad feeling about the market- it feels like the late 90s and the mid 2000s all over again. At 47, I'm doing pretty good to retire by 62, unless I get wiped out again.
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I hate to bring up math, but the way you paydown the debt is to reduce spending to less than you're taking in, not by fiddling with interest rates. That hasn't happened since Clinton was in office, and he quickly corrected that fluke.
Current interest on the debt: $479 Billion
FY 18 Deficit: $779 Billion
While you are correct, in this case "playing around with the interest rates" can help us reduce us to less than we are taking in.
Additionally, every year we pay that interest on the debt with more debt. Making the interest payment higher each year.
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A few points I think I know:
1. Past Presidents have made big efforts to refinance the debt at lower interest rates. I don't think that is a new idea. Treasury notes have been low for a while I thought.
2. Someone above asked why Trump doesn't pay down the National Debt. Unless you want Trump to become dictator for life, that really is Congress' job. The President can try to get control of spending for what he has control off, but the appropriations to the various departments are what needs to change and that goes through Congress. It doesn't matter if Govt tax revenues double if Congress just spends it all.
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the appropriations to the various departments are what needs to change and that goes through Congress
Just declare the debt a national emergency.
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Just declare the debt a national emergency.
Well, it is.
It's an ignored one, but every day we're ticking towards that (unknown and unknowable) point where investors decide that the U.S. Government debt is no longer a safe bet.
At that point, I don't know that we have any idea what will happen, but it won't be good.
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Current interest on the debt: $479 Billion
FY 18 Deficit: $779 Billion
While you are correct, in this case "playing around with the interest rates" can help us reduce us to less than we are taking in.
Additionally, every year we pay that interest on the debt with more debt. Making the interest payment higher each year.
The annual interest is still 300 billion less than the deficit. So even the unrealistic goal of zero interest wouln't stop the red ink. And not a single candidate is talking about spending reductions, so it doesn't seem to be very high of a priority.
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And not a single candidate is talking about spending reductions, so it doesn't seem to be very high of a priority.
Actually...
Mark Sanford, the former congressman and governor from South Carolina, is the latest Republican to challenge President Trump for the 2020 nomination.
Sanford intends to make the rising national debt his main issue, as it was during his congressional career.
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OK. The odds are probably against him but I'll check him out.
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The odds are probably against him
That's an understatement. He has basically zero chance, but at least he's trying to talk about it.
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That was the guy who got caught running off to see his girlfriend in South American right?
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That was the guy who got caught running off to see his girlfriend in South American right?
That's him. He's not a serious candidate, which is why he's making something no one* cares about the centerpiece of his campaign.
*statistically speaking
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Sanford was decent as a governor till he lost his damn mind